A friend was told from another person to withdraw from his 401k to use as a down payment to purchase a condo. I told him this pry wasn't the greatest idea due to all the taxes/fees involved but have brought up a few questions when I did some research.

1. Can you withdraw from a Traditional IRA up to 10k tax free for a house downpayment? Or just penalty free?
2. Do some 401k plans offer a first time home buyer loan? Everything I read as a distribution still gets the 10% penalty plus fed tax.
3. Would a state income tax also be applied to the 401k distrubition?